July 18 (Bloomberg) -- Acer Inc., the world’s third-largest
computer maker, had its credit rating cut one level by Fitch
Ratings to junk grade less than a week after lowering its growth
forecast for the year.

Fitch changed Acer’s long-term foreign and local currency
rating to BB+ from BBB-, with a negative outlook, meaning a
further downgrade is possible, it said in a statement today.

“This is a structural issue, because the company is quite
concentrated in the PC market but does not have strong
performance in terms of the non-PC area such as handsets, media
tablets or services generated from enterprise customers,” Kevin
Chang, a Taipei-based credit analyst at Fitch, said by phone
today.

A weakening economy and a more cautious view toward
Microsoft Corp.’s new operating system prompted the maker of
Timeline and TravelMate computers to more than halve its growth
forecast for the year last week. Intel Corp., the world’s
biggest chipmaker, scaled back its annual sales estimate
yesterday as personal-computer demand fails to rebound among
consumers in the U.S. and Europe.

Henry Wang, a spokesman for Taipei-based Acer, declined to
immediately comment on the report.

Yield Narrows

The yield on Acer’s August 2015 convertible bond narrowed
to 1.21 percent today before the announcement from a high of
4.29 percent on Oct. 6, which was two weeks before posting its
second consecutive quarterly loss, according to Barclays Plc
prices. Its third-quarter net loss of NT$1.1 billion ($37
million) followed a second-quarter loss of NT$6.79 billion.

Acer posted its first annual loss on record last year after
writing off about $300 million in inventories in Europe
following faltering sales amid the increased popularity of Apple
Inc.’s iPad.

“They are facing additional challenges this year such as
Microsoft and Google also launching tablets that will get
attention from consumers and maybe competing for the small
budget that customers have,” Chang said. “While the PC is not
that popular in front of general consumers, the company could be
struggling in terms of recovering the profitability it had
before.”

Acer’s shares fell 2.5 percent to NT$27.50 in Taipei
trading today before the announcement, the lowest level since
June 2003. The stock has declined 22 percent this year compared
with a 0.3 percent drop in the benchmark Taiex Index.

Acer had a cash balance of NT$60 billion at the end of
March, “comfortably covering” its total debt of NT$23 billion,
Fitch said in the statement.